VSA IRS CPA Review

Management Advisory Services CVP Relationship

1. Alexis Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of
P500,000. How much is the contribution margin?
a. 1,300,000 c. 1,500,000
b. 800,000 d. 2,000,000
2. Alexis Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of
P500,000. The company sold 1,000 units. How much is the contribution margin per unit?
a. 1,300 c. 1,500
b. 800 d. 2,000
3. Alexis Company has a unit sales price of P2,000, variable costs per unit of P700 and total fixed
costs of P390,000. How much is the contribution margin per unit?
a. 1,300 c. 2,000
b. 390 d. 700
4. Alexis Company has a sales of P2,000,000, variable costs per unit of P700,000 and fixed costs of
P390,000. How much is the contribution margin ratio?
a. .35 c. .70
b. .65 d. .20
5. Alexis Company has a unit sales price of P2,000, variable costs of P700 and total fixed costs of
P500,000. How much is the contribution margin ratio?
a. .35 c. .70
b. .65 d. .20
6. If the sales of the company amounted to P2,000,000 and the contribution margin ratio is 30%,
how much should have been the contribution margin?
a. 700,000 c. 600,000
b. 1,300,000 d. 1,400,000
7. If the sales of the company amounted to P2,000,000 and the contribution margin ratio is 30%,
how much should have been the variable costs?
a. 700,000 c. 1,400,000
b. 1,300,000 d. 1,500,000
8. If the income of the company is zero and the contribution margin is P300,000, how much should
have been the fixed costs?
a. 3,000,000 c. 150,000
b. 300,000 d. zero
9. Alexis Company has a unit sales price of P2,000, variable costs per unit of P700 and total fixed
costs of P390,000. How many units should be sold in order for the company to have zero profit?
a. 195 c. 300
b. 557 d. 495
10. Alexis Company has a unit sales price of P2,000, variable costs per unit of P700 and total fixed
costs of P390,000. How much should be the break even point in peso amount?
a. 390,000 c. 800,000
b. 253,500 d. 600,000
11. Alexis Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of
P390,000. How much should be the break even point in sales?
a. 390,000 c. 1,100,000
b. 1,300,000 d. 600,000
12. Alexis Company has a sales of P2,000,000, variable costs of P700,000 and fixed costs of
P390,000. The company sold 1,000 units. How many units should be sold in order for the
company to break even?
a. 390 c. 600
b. 1,300 d. 300
13. If the breakeven point is 200 units and the contribution margin per unit is P100, how much should
have been the fixed costs?
a. 100 c. 2
b. 200 d. 20,000
14. If the breakeven point is P4,000,000, the variable cost per unit is P300 and the contribution
margin per unit is P100, how much should have been the fixed costs?
a. 3,000,000 c. 2,000,000
b. 1,000,000 d. 4,000,000
15. Alexis Company has a unit sales price of P4,000, variable costs of P700 and total fixed costs of
P330,000. How much is the margin of safety in pesos if the company’s actual sales amounted to
P40,000,000?
a. 0 c. 39,600,000
b. 400,000,000 d. 40,000,000
16. Alexis Company has a unit sales price of P4,000, variable costs of P700 and total fixed costs of
P330,000. How much is the margin of safety in units if the company’s actual sales amounted to
P40,000,000?
a. 39,600 c. 3,960
b. 396,000 d. 9,900
17. If breakeven point is P70,000 and the margin of safety ratio is 30%, how much is the actual
sales?
a. 100,000 c. 30,000
b. 70,000 d. 163,000
18. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. How much should be the net income?
a. 60,000 c. 20,000
b. 80,000 d. 40,000
19. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. If there is a 10% increase in sales, how much should be the percentage of
change in income?
a. 1.5 c. 25%
b. 15% d. 5%
20. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. If there is a 10% increase in contribution margin, how much should be the
percentage of change in income?
a. 1.5 c. 25%
b. 15% d. 5%
21. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. How much is the degree of % of change in income for every % of change in
sales?
a. 1.5 times c. 4 times
b. 3 times d. 4.5 times
22. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. There is a subsequent 10% increase in sales. How much is the degree of
operating leverage?
a. 1.5 times c. 4 times
b. 3 times d. 4.5 times
23. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. There is a subsequent 20% increase in sales. How much is the degree of
operating leverage?
a. 1.5 times c. 4 times
b. 3 times d. 4.5 times
24. The company has the following level of operations: sales- P100,000, variable costs-P40,000,
fixed costs-P20,000. If the company wishes to increase DOL to 4, how much should be the
increase in fixed costs assuming contribution margin remains the same
a. 45,000 c. 65,000
b. 25,000 d. 20,000
25. Bulacan Gold, Inc. manufactures and sells key rings embossed with college names and slogans.
Last year, the key rings sold for P75 each, and the variable costs to manufacture them were
P22.50 per unit. The company needed to sell 20,000 key rings to break-even. The net income last
year was P50,400. The company expects the following for the coming year:
o The selling price of the key rings will be P90.
o Variable manufacturing costs per unit will increase by one-third.
o Fixed cost will increase by 10%.
o The income tax rate will remain unchanged.
For the company to break-even the coming year, the company should sell
a. 21, 600 c. 21,250
b. 2,600 d. 19,250
26. A company has revenues of P500,000, variable costs of P300,000, and pretax profit of P150,000.
If the company increased the sales price per unit by 10%, reduced fixed costs by 20%, and left
variable cost per unit unchanged, what would be the new breakeven point in pesos?
a. P 88,000 c. P110,000
b. P100,000 d. P125,000
27. Mela Corporation has a contribution margin ratio of 0.26. It aims to have a net income of
P320,000 with a sales volume of P2 million. Its total fixed costs amount to
a. 21, 600 c. 21,250
b. 2,600 d. 19,250
28. Maribel is selling three products: Red, White, and Blue. The company sells three units of Red for
every unit of Blue, and two units of White for every unit of Red. Fixed costs are P720,000.
Contribution margin are:
P1.90 per unit of Red
2.00 per unit of White
2.30 per unit of Blue
How many units of White would the company sell at breakeven point?
a. 360,000 c. 72,000
b. 108,000 d. 216,000

Questions 30 to 32 are based on the following information. A company sells two products X and Y.
The sales mix consists of a composite unit of two units of X for every five units of Y (2:5). Fixed costs
are P49,500. The unit contribution margins for X and Y are P2.50 and P1.20, repectively.
29. Considering the company as a whole, the number of units to break even is
a. 31,500 c. 8,250
b. 4,500 d. 9,900
30. Considering the company as a whole, the number of composite units to break even is
a. 31,500 c. 8,250
b. 4,500 d. 9,900
31. If the company had an operating income of P22,000, the unit sales must have been
Product X Product Y Product X Product Y
a. 5,000 12,500 c. 23,800 59,500
b. 13,000 32,500 d. 28,600 71,500
Questions 33 through 34 are based on the following in formation. Multiframe Company has the
following revenue and cost budgets for the two products it sells:
Plastic Frames Glass Frame
Sales price P10.00 P15.00
Direct materials (2.00) (3.00)
Direct Labor (3.00) (5.00)
Fixed overhead (3.00) (2.75)
Net income per unit P 2.00 P 4.25
Budgeted unit sales 100,000 300,000
The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is
budgeted at P975,000. Assume that the company plans to maintain the same proportional mix. In
numerical calculation, MultiFrame rounds to the nearest cent unit.
32. The total number of units MultiFrame needs to produce and sell to break even is
a. 150,000 units c. 100,000 units
b. 153,947 units d. 300,000 units
33. The total number of units needed to break even if the budgeted direct labor cost were P2 for
plastic frames instead of P3 is
a. 144,444 units c. 153,947 units
b. 150,000 units d. 100,000 units
34. Two companies are expected to have annual sales of 1 million decks of playing cards next year.
Estimates for next year are presented below:
Company 1 Company 2
Selling price per deck P3.00 P3.00
Cost of paper per deck .62 .65
Printing ink per deck .13 .15
Labor per deck .75 1.25
Variable overhead per deck .30 .35
Fixed costs P960,000 P252,000

Given these data, which of the following responses is correct?

Volume in Units
Breakeven Breakeven at which profits
Points in Point in of Company 1
Units for Units for and Company 2
Company 1 Company 2 Are Equal
a. 800,000 420,000 1,180,000
b. 800,000 420,000 1,000,000
c. 533.334 105,000 1,000,000
d. 533,334 105,000 1,180,000
USE THE FOLLOWING FOR THE NEXT ITEMS. The following is Addison Corporation’s contribution
format income statement for last month:
Sales P1,000,000
Less variable expenses 700,000
Contribution margin 300,000
Less fixed expenses 180,000
Net income P 120 00
The company has no beginning or ending inventories. A total of P20,000 units were produced and sold
last month.
35. What is the company’s contribution margin ratio?
a. 250% c. 70%
b. 150% d. 30%
36. What is the company’s break-even in units?
a. 20,000 units c. 18,000 units
b. 0 units d. 12,000 units
37. If sales increase by 100 units, by how much should net income increase?
a. P 400 c. P1,500
b. P4,800 d. P2,500
38. How many units would the company have to sell to attain target profits of P150,000?
a. 22,000 c. 25,000
b. 37,500 d. 26,667
39. What is the company’s margin of safety in pesos?
a. P400,000 c. P120,000
b. P600,000 d. P880,000
40. What is the company’s degree of operating leverage?
a. 0.12 c. 0.4
b. 2.5 d. 3.3

END